American Express is robbing you!

Recently, I got a letter in the mail offering me an American Express Delta SkyMiles credit card. Right away, you know there will be trouble:

Dear <your name>:

You’ve been experiencing the benefits of Cardmembership carrying a Card on someone else’s account. Now, we’d like to invite you to get a Gold Delta SkyMiles Card, with no annual fee for your first year – that’s a savings of $95. You’ve earned the right to get your own Card and Award Travel! – And you’ll be the Basic Cardmember, so the spending you do will count toward your own excellent credit history.

Okay, did you notice anything in that paragraph? That’s right; the annual fee for the card is $95 dollars. Every single year, you have to pay for the privilege of carrying one of their credit cards, which is outrageous! Credit card companies make billions of dollars because they have a very simple business plan. When you use your credit card and don’t pay it on time, they charge you an extremely large interest fee. All the credit card companies have to do is loan you money, which costs them nothing. That is why most credit cards have no recurring fees whatsoever…the companies can afford it.

So why would anyone intentionally opt to pay recurring fees just for having a credit card? Well, it turns out that there is another part of the story for the American express card. By using the card in your day to day life, you earn sky miles. When you have enough miles, you can get a free or near free plane ticket. This sounds like a good deal, right? Well, yes and no. For most of us, we don’t spend enough money fast enough in order to actually come out positive. That is, if you don’t use the card a lot, the annual recurring fee is going to cost you more than you would ever save by getting a free plane ticket. If you have a very good salary and spend several thousand dollars a month with the American Express Delta SkyMiles card, then it may be a good idea. If you don’t use your credit card that much, the American Express Delta SkyMiles card will ending up costing you a lot of money in the long run. The only responsible thing to do is avoid any sort of credit card with a recurring fee of any kind.

Posted under Avoiding Fees, Avoiding Scams, Hidden Fees, Saving Money, Shopping

This post was written by admin on September 11, 2008

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Save money when paying bills

Avoid the convenience fees

We all have to pay bills, but how can we get away with paying less? As it turns out, there are a couple ways to save money while paying bills. Most major companies have ways to pay online, which is simple, and safe. Unfortunately, there is more to the story. Companies which allow you to pay bills online need to pay employees or other companies to make and operate the website. Some companies are benevolent, and end up absorbing the extra cost of operating their website. Other companies choose to charge it’s customers a ‘convenience fee’ for paying their bills online. That’s right; you have to pay just for the privilege of paying your bills. Sometimes, this cost can be very significant in proportion to the actual bill.

For example, I recently got a bill for $5.78 for water and sewage from Minol L.P. I went to their website to pay the bill, and that is when I noticed that they charge a 3 dollar convenience fee, which is ridiculous! The additional fee was actually over 50% of my original bill! It is likely that Minol L.P. pays another company which operates the online billing of customers, and that company receives the majority of the proceeds from the ‘convenience fees.’ But at the end of the day it doesn’t really matter where the money goes. All that matters is that it is no longer in your wallet!

Fortunately, we have a choice. Virtually all companies offer an option to mail in a check. There is usually no convenience fee attached to this. You sometimes need to pay for an envelope and stamp. You can get envelopes from office max for about 2.5 cents each if you buy a box, and you can get a stamp for 42 cents each from the post office. It’s best to buy a little book of stamps to avoid having to go to the post office every month. Your actual checks may cost up to 5 cents each. Let’s do a little math to see how much money we can save from one company for an entire year.

( 3.00 – .42 – .025 – .05) * 12 = 30.06

Just by sending your bills in the mail instead of paying the ‘convenience fees’ online, you can save over thirty dollars each year for each company that charges you extra when you pay online. While there may be a certain ‘convenience’ when paying the bills online, it’s just as easy to put a check in an envelope during a television commercial.

Recurring payments

Recurring payments can be just as deadly. Some companies charge a convenience fee and/or a setup fee to arrange automatic monthly withdraws from your bank account. This is a common practice with some insurance companies. While it is convenient, it costs you a significant amount of money during the course of the year. Again, once a month, during a commercial, you can put a check in an envelope and save some money. Again, some companies are benevolent, and do not charge any fees for recurring payments. If you can not find any information about fees, it may be best to go ahead and enroll in automatic payments. You can even check your bank online and make sure the amount you’re being charged is the actual amount of the bill. If you find any hidden fees, you can always cancel recurring payments.

Sometimes, companies charge a setup fee for recurring payments, but to make a one time payment with a credit card is free. In these cases, it’s best just to pay online. Other companies charge a one time setup fee for recurring payments, and also charge you when you make a one time payment. For this situation, it is usually best to pay the setup fee, since it will generally cost less than buying a stamp and sending a letter through the mail every month. The main point I’m trying to make here is that you need to look at all your options, and see which one will cost you the least amount of money.

Recurring apartment rent

If you live in an apartment, one of the worst things you can do is be enrolled into an automatic payment plan for rent. These ‘services’ charge you 30 dollars a month, sometimes more. Wouldn’t you rather spend a couple minutes each month to write and drop off a check instead of spending 30 dollars? If you are currently using such a plan for automatic rent payment from your bank account or credit card, this could cost you over $360 a years!

Car payments

Car payments are in another field altogether because interest is involved. For my car payments, recurring payments are free, but if I choose to pay an extra, one-time, payment on the car, there is a 5 dollar convenience fee for an electronic check and a 10 dollar convenience fee if you use a credit card. So in other words, you have to pay a lot for the privilege of paying your bills online! It makes very little sense to make a one time payment of 20 dollars, because only 80% of the total money you pay will go towards the actual car payment. If you pay those 20 dollars by credit card, only 66% of the money you pay will actually go towards the car, which is terrible! Instead, save your money up and make larger payments. It usually takes time to save your money up, and during this time you will be charged interest. Therefore it’s important to get out a calculator with your specific interest rate, and one-time payment ‘convenience fee’, and try to work out when the best time to make the payment is, and how much you can pay.

Often, it is not worth it to pay a convenience fee even for a car loan. Suppose you have a low, 6% APR on your car, with $10,000 left on the loan. Suppose you are making a one time payment of $2,000. Now suppose it takes 5 days for your snail-mail to arrive and be processed by your lien holder. In this scenario, interest alone for that $2,000 will cost you $1.65 for those 5 days. So even with the interest, it can still cost a couple dollars less to actually send the payment by mail rather than pay online. If you have a couple spare minutes during the day, it is worth pulling out your calculator and seeing whether or not it’s worth it to pay online.

Conclusion

Hopefully you will be able to integrate some of the advice in these articles into your daily lives so you can save some money. If you have to pay multiple bills for gas, electric, water, sewage, cable, internet, car, and home, it is well worth your time to take that calculator out, and see which convenience fees are worth avoiding, and which are worth paying. Your biggest savings may very well come from your car and home loans. However, if you can save 30 dollars a year per utility company simply by paying by regular mail, that is free money in your pocket!

Posted under Avoiding Fees, Hidden Fees

This post was written by admin on August 6, 2008

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